Cereals

Tighter world cereal supplies, especially for wheat

Latest information points to a global cereal output of 1 878 million tonnes (including rice in milled equivalent) in 2002, considerably less than the previous forecast in May, and marginally below last year’s level. The downward revision is mostly a result of a deterioration of prospects for several of the major wheat crops around the globe because of adverse weather. With opening stocks smaller than in the previous season and production falling, while consumption is expected to rise, the new 2002/03 marketing season could mark the beginning of a much tighter supply and demand situation than experienced in recent years. However, lower world import demand coupled with large supplies in a number of non-traditional exporting countries could, to some extent, mitigate the negative impact of smaller availabilities in some major exporting countries and the expected sharp decline in global stocks.

Wheat and coarse grain production down in 2002

The forecast for global wheat output in 2002 has been revised downward sharply since the previous report to 578 million tonnes, taking it 3 million tonnes below the previous year’s level. This would be the fifth successive year-on-year decline and the smallest crop since 1995. Since the previous report in May, production prospects have been seen to deteriorate in virtually all regions, largely reflecting adverse dry weather for developing crops in some of the main producing areas in the northern hemisphere, such as the case in northern China, several eastern European countries and the central plains of the United States, or for planting in the southern hemisphere, namely in Australia. In South America, financial problems in Argentina have been the main hindrance to planting there. Only for North Africa has the forecast been increased over the past two months, and mostly due to the benefit of some late season rains in Morocco following earlier dry conditions. The outlook remains unchanged for Central America where an above-average crop is expected.

The forecast for global coarse grain output in 2002 has also been revised downward since the last report, by 6 million tonnes, to 903 million tonnes, putting it 3 million tonnes below last year’s harvest but still above the average of the past five years. Most of the recent revision is confined to the Russian Federation, where the earlier good potential that followed an increase in the winter grain area has been eroded by dry weather conditions and a smaller crop than last year is now expected. Reduced harvests expected in some eastern European countries and in EC also contribute to an overall decline foreseen in the European region. Smaller coarse grain crops this year, compared to last, are also expected in Africa, Central America, South America and Oceania. Latest information still points to larger outputs in 2002 in North America and Asia but much could still depend on weather conditions in the coming months for the summer maize crops which have only been recently planted in some parts.

Planting of the 2002 main season paddy crop is about to be completed in the northern hemisphere, while the main season is virtually over in countries located along the equator and in the southern hemisphere. Global paddy production in 2002 is now anticipated to reach 593 million tonnes (397 million tonnes in milled equivalent), up nearly 6 million tonnes from the previous forecast, and just marginally below the estimated output in 2001. The latest revision reflects more optimistic expectations in some Asian countries, which assume a normal monsoon and a reduced likelihood that an El Niño weather event, should it develop fully later this year, could have a significant negative impact on the main crop season now underway.

Larger imports only in the developing countries

World cereal trade in 2002/03 is forecast at 235 million tonnes, down 1 million tonnes from estimated imports in 2001/02. Most of this anticipated decline would result from smaller wheat and rice imports, while trade in coarse grains is expected to increase slightly. However, the global level forecast masks a significant redistribution of the cereal trade in 2002/03. While imports by the developed countries are forecast to fall sharply, and could amount to only 57 million tonnes, an almost equally large increase is expected for the developing countries as a group, whose imports could rise to a record 178 million tonnes.

World Cereal Production, Supplies, Trade and Stocks

Growth in cereal utilization to slow in 2002/03

Following a fairly significant expansion in 2001/02, growth in world cereal utilization in 2002/03 could slow by one-half to 0.7 percent. The forecast for total utilization in 2002/03 is put at 1 951 million tonnes, 13 million tonnes above the estimate for the previous year but just below the ten-year trend value. In 2002/03, the volume of cereals used for human food is forecast to reach 984 million tonnes. At this level, no change in per caput cereal consumption is expected. Global feed use could contract slightly from 2001/02 to 704 million tonnes, while other uses may increase.

Cereal stocks will fall sharply again

World cereal stocks by the end of the crop seasons in 2003 are now forecast to fall to 498 million tonnes, 72 million tonnes down from their already reduced opening level. A significant downward revision to the forecast has been made since May following the substantial reduction in the forecast for production in 2002. At the global level, the anticipated decline in wheat inventories would be most significant but reductions in coarse grains and rice stocks are also expected to be substantial. The primary factor behind the global stocks depletion in recent years continues to be the developments in China, where, following a period of large stocks, the Government is seeking to reduce its national inventories.

Cereal prices are moving up

International wheat prices rose considerably compared to recent months and the corresponding period last year, mostly in response to less favourable crop prospects in a number of major exporting countries. However, with harvests getting underway in most wheat producing countries in the northern hemisphere, seasonal factors could bring prices under renewed downward pressure in the coming weeks. Nevertheless, the longer-term outlook points to more persistent price strengthening in the coming months in view of generally tighter wheat supplies in major exporting countries. International maize prices have also strengthened over the past two months and, compared to a year ago, largely reflecting a faster pace in import purchases in recent weeks, but the outlook is uncertain. While world import demand could be on the rise compared to last year, the size of some countries’ exportable maize supplies is difficult to gauge, and large supplies of feed wheat could undermine demand for maize in some markets. International rice prices have risen slightly since the last report reflecting tighter supplies in some exporting countries and policy measures in others. The FAO Export Price Index for Rice (1982-84 =100) has risen by 1 point since April. Rice prices are expected to remain subdued in the next few months as the production outlook in the northern hemisphere has improved somewhat and global import demand could be lower.